A trader owns certain amount of gold. The trader can buy gold for $2025 per...
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A trader owns certain amount of gold. The trader can buy gold for $2025 per ounce and sell it for $2011 per ounce. The trader can borrow funds at 6% per year and invest funds at 5.5% per year (both interest rates being expressed with annual compounding). For what range of one-year forward prices does the trader have no arbitrage opportunities? Assume there is no bidoffer spread for forward prices. (15%)
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